Shale play built on expertise, risk, secrecy — and simple handshake

Geologist Gregg Robertson (left) worked with people at Petrohawk Energy in Houston and their discovery in La Salle county turned out to be a historic find: the Eagle Ford shale formation. Standing (right) with Robertson is Robert Graham, a landman who helped put together leased acreage on the Eagle Ford area. On the table is a map of the Eagle Ford area.

Photo By JOHN DAVENPORT/SAN ANTONIO EXPRESS-NEWS

Drilling rigs like this one in McMullen county, Texas near Tilden are are becoming a common sight. Drilling companies are now drilling into the Eagle Ford shale formation south of San Antonio using deep wells that employ a process called hydraulic fracturing that produces dry gas, wet gas and oil.

Photo By Jake Lacey/HOUSTON CHRONICLE

A drilling site owned by Petrohawk Energy Corp. at the Eagle Ford Shale.

Photo By Express-News file photo

Lufkin Company employee Eric Poor works on a pump jack.

Photo By JOHN DAVENPORT/SAN ANTONIO EXPRESS-NEWS

Drilling rigs like these near Karnes City, Texas are popping up all over south Texas in an area known as the Eagle Ford shale formation. The formation stretches from a region northeast of San Antonio down to Laredo and Webb county.

Photo By JOHN DAVENPORT/SAN ANTONIO EXPRESS-NEWS

Welding crews are busy laying pipelines such as this one east of Karnes City, Texas in order to get oil and gas extracted from the Eagle Ford shale formation to market. Pipelines are critical because hauling by truck is more expensive.

Photo By JOHN DAVENPORT/SAN ANTONIO EXPRESS-NEWS

Oil workers work on a rig over the Eagle Ford shale formation near Tilden, Texas in mid march of 2011. Wells in area are extracting oil and gas using a technique called hydraulic fracturing.

Photo By JOHN DAVENPORT/SAN ANTONIO EXPRESS-NEWS

Drilling pipe is stacked on a rig near Tilden, Texas.

Photo By JOHN DAVENPORT/SAN ANTONIO EXPRESS-NEWS

Drilling rigs like this one in near Tilden, Texas, are are becoming a common sight as companies are now drilling into the Eagle Ford shale formation using a process called hydraulic fracturing.

Photo By JOHN DAVENPORT/SAN ANTONIO EXPRESS-NEWS

A rig worker is perched high up on a rig on State Highway 97 between Fowlerton and Cotulla, Texas over the Eagle Ford shale formation. A sign on the rig read: Precision Rig #43.

Photo By JOHN DAVENPORT/SAN ANTONIO EXPRESS-NEWS

Pipe is loaded onto a drilling rig near Cotulla over the Eagle Ford formation in South Texas.

Photo By John Davenport/San Antonio Express-News

The school districts in the Eagle Ford Shale play, including the Cotulla ISD, have seen property values jump.

Photo By JOHN DAVENPORT/SAN ANTONIO EXPRESS-NEWS

Pipe yards like Stallion Oild Field Services in Tilden, Texas are seen in the Eagle Ford shale formation area.

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In one 15-minute meeting, the stage was set to transform land in La Salle County that was known more for deer hunting and rattlesnakes into the one of the best shale plays in the country.

Sure, there'd been successful wells drilled in the past, but by 2007 the area seemed played out. There were some decent natural gas wells, but also some dry holes.

So when a land man approached Joe Martin III about leasing thousands of acres of his family's property to drill, he was delighted.

“We were eager to do any kind of lease in La Salle County,” said Martin of Laredo. “We had no idea, even after they paid us, what they were looking for. We were just very happy to lease the land.”

It turns out the Martin deal was among the first in a stealthy effort that led to leases on about 150,000 acres in South Texas that would become the heart of one of the biggest developments in Texas oil and gas in decades: the Eagle Ford Shale.

The secret effort was led by geologist Gregg Robertson of Corpus Christi and Houston-based Petrohawk Energy Corp. In an unusual arrangement, Petrohawk bet heavily on Robertson's knowledge of shale thousands of feet below the earth's surface and shared company information with him, information about the potential of the play that had to be kept secret — even from the landowners they were trying to cajole.

Today, their leases are at the heart of a discovery that's been dubbed one of the top two or three shale plays in the nation.

The success of the Robertson-Petrohawk partnership has sparked a frenzy of deals and drilling that has drawn investment from major energy companies in the United States and around the world.

Development of the Eagle Ford Shale “has the potential to be the single most significant economic development in our state's history,” Texas Railroad Commissioner David Porter has said.

It all started in late 2007, Robertson said, when he came across the initial lead that indicated the Eagle Ford would be a viable shale play.

Some companies were drilling in South Texas in the Austin Chalk, a formation sitting above the Eagle Ford Shale. At least one natural gas well in Live Oak County was successful, but others drilling in Karnes and DeWitt counties produced dry holes, Robertson said.

“They pursued the wrong development plan,” he said dryly. “I thought the productive play was the Eagle Ford.”

Floyd C. Wilson, former CEO of Petrohawk and now chairman and CEO of Halcon Resources LLC, recalled in a phone interview that he asked Dick Stoneburner, then chief operating officer, to start digging for a new deal after the company's success in the Haynesville Shale.

Stoneburner's friend Robertson brought his ideas about Eagle Ford and worked with a select group of Petrohawk's top brass.

“I'd been waiting for them to show me what the idea was,” Wilson said.

He took one look and jumped.

“We decided in 15 minutes to be heads-up partners and start leasing. We did it on a handshake,” he said. “Gregg had done great work. With most of these things, you have to get lots of attorneys involved. It's slower. More formal. Lots of meetings.”

“We gave Gregg a pretty big check to get started leasing land,” Wilson said. Secrecy was paramount to avoid alerting other companies to the shale's potential and to prevent a run-up in prices.

Even within Petrohawk, only top executives knew of the drilling plans in South Texas.

“Petrohawk was widely known as being a major player in shales,” Robertson said. “So if Petrohawk had come into the area and started acquiring leases, it would've caused enormous commotion.”

Robertson's company, First Rock Inc. of Corpus Christi, turned to land man Robert Graham of Boerne to acquire the leases on thousands of acres in South Texas. Behind the scenes, Petrohawk was sending the bulk of the funding — about $20 million — through Robertson, who took a 10 percent interest in the venture and wrote the checks to the landowners. The 90-10 split remains in force today.

“We put together 100,000 acres in two months, which is unheard of,” Robertson said. “By the time we started drilling, we had 150,000 acres leased.” The secrecy worked, because most landowners didn't know their neighbors also were signing.

The ranches in South Texas were large, which meant fewer landowners to deal with, helping Graham's team put together acreage quickly.

By the time Petrohawk started its first well, other companies started jumping in. “They were probably thinking, ‘We don't know what's happening, but we've got to get in there,'” said Graham, president of R&J Graham Energy Inc.

Petrohawk announced its Eagle Ford Shale find Oct. 21, 2008. Graham said he'd acquired leases in the Eagle Ford for an average of $175 an acre, a price that jumped to about $400 after Petrohawk's first well was announced.

Not all the landowners are happy today, Robertson said, because they weren't paid $10,000 an acre — what some landowners are getting now.

But Martin, one of the first to sign on, is philosophical about it.

“We didn't know it was going to work, and they didn't know it was going to work. They took a tremendous risk,” he said.

The first well was drilled in La Salle County in August 2008. Initial reports of the well's success reached Robertson via email — and Petrohawk's Stoneburner — during the Texas-OU football game on Oct. 11, 2008. “It's a discovery,” Robertson realized. “It's real.”

Petrohawk's success in the Eagle Ford Shale helped make the company attractive to Australia-based BHP Billiton, which acquired Petrohawk in August for $15.1 billion.

BHP Billiton declined to make Stoneburner and others who shared in the discovery available for interviews. But the company gave credit in a statement: “Petrohawk Energy Corp. and First Rock successfully discovered and developed the Eagle Ford Shale and continue to explore other opportunities now through BHP Billiton Petroleum, who acquired Petrohawk in August 2011.”

Wilson said Petrohawk's handshake deal with Robertson “was kind of storybook, really. Just being able to do it so quickly with no missteps. And it's probably the best shale play in the world right now.”

The drill bit from Petrohawk's first Eagle Ford well has been bronzed and given an honored spot in BHP Billiton Petroleum's Houston offices.